ABA Opposes Debt Limit Change for Chapter 12 Bankruptcies

The American Bankers Association today urged lawmakers not to vote for a bill that would significantly raise the current debt limit for Chapter 12 bankruptcy filings. In a letter to House leaders, ABA warned that H.R. 2336—which would raise the debt limit from approximately $4.3 million to $10 million—could ultimately increase the cost of borrowing for farmers and ranchers and reduce the overall availability of credit.

Chapter 12 bankruptcy was designed to help farmers avoid foreclosure or liquidation of their farms by reorganizing their debts—and it includes expansive rights for debtors that do not exist in other chapters of the bankruptcy code. ABA pointed out in the letter that the current debt limits under Chapter 12 are already indexed to inflation and are adjusted accordingly every three years.

“Given that the debt limit is already adjusted for inflation, there is little survey or statistical evidence that would justify an arbitrary increase of nearly $6 million in the current limit,” the association said.